The long-awaited inflation indexed bonds for retail investors that will protect savings from price rise will be launched on Monday.

“The government, in consultation with RBI, has announced issuance of Inflation Indexed National Savings Securities Cumulative for retail investors by opening the subscription on December 23 and closing on December 31,” said a finance ministry release, adding that it could be closed earlier. The minimum limit for investment is Rs 5,000 and the maximum is Rs 5 lakh per applicant per year.

The interest rate on these bonds would be linked to the Consumer Price Index (CPI).

The interest rate would comprise two parts — a fixed rate of 1.5 per cent per annum and inflation rate based on CPI with a lag of three months. It would be compounded on the principal on half-yearly basis and paid at the time of maturity.

While for senior citizens, early redemption would be allowed after one year from the date of issue, other investors can redeem them after three years but with penalty of 50 per cent of the last coupon paid.

Distribution or sale of bonds would be through banks: SBI, nationalised banks and three private banks HDFC Bank, ICICI Bank and Axis Bank.